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There is no universal definition of 'franchising', but typically, franchise is the grant of a licence to carry on a copycat business by a larger business operation (the franchisor) to a purchaser (the franchisee) in return for an upfront fee. Further ongoing fees are payable under the agreement, often as a percentage of turnover. The licence enables the franchisee to benefit from a range of items that might be on offer from the franchisor, such as the following:

1. •

   use of the brand name and company logos

2. •

   use of the marketing strategy

3. •

   the ability to purchase stock

4. •

   access to suppliers and possibly financing

5. •

   IT and sales support

6. •

   the provision of training

The benefit of operating a business in this way is that the franchisor benefits from an up-front and ongoing stream of fee income, whilst the franchisee generates profits without having to incur the time and expense of establishing a new brand and business model. A number of fast food restaurants operate using the franchise model, for example.

A useful source of background